1. ENTERPRISE COSTING WORKGROUP MEETING April 6, 2013

2. A Call to Action Costing Initiative Formalize a standard measurement system for outcomes and costs. Value and Quality Based Payments Implement bundle pricing system encompassing full care cycle. Value-Based Health Care Delivery Organize healthcare services focused on the patient and the patient’s medical condition. Copyright Porter, 2011 2

3. BCH Department of Plastic and Oral Surgery: Costing Analysis 3

4. BCH Department of Orthopedic Surgery: Costing Analysis 4

5. Recommendations Replace existing costing methodology with TDABC for costing analysis Adjust charges to reduce cost distortions Identify operational inefficiencies to increase bottom-line Perform marginal analysis to establish level of tolerable variations within care cycles 5

6. The Next Step - Taking Action Information Technology PlatformQuality-of-CareBundled Payments Physician Bonus Payments 6

7. Bundled Pricing System Define Episodes of care / Care path Set of services needed over full care cycle Standardize care path variation Set the Price Fixed payment covers associated cost of care for all predicted services rendered during care path (outliers and special circumstances are not included) Consideration of reimbursement rates versus available benchmarking data Implement Continuous monitoring of cost relative to outcomes (quality) Internal benchmarking Buy-in by all departments involved in care 7

8. Value-Based Healthcare What is Value? Value = Health Outcomes / Costs In other words: Improving Outcomes & Reducing Costs = Increased Value recovery, ability to function, duration of care, quality of life, discomfort, satisfaction clinical and administrative personnel, drugs and supplies, space and equipment 8

9. Value-Based Health Outcomes Hierarchy Assessment Recovery Process Health Grade Achieved Recovery Ability To Function SatisfactionQuality of LifeDiscomfort Long-term Complications 9

10. The Patient Perspective Value must be measured AT THE PATIENT LEVEL How does this help the patient? How does the patient perceive value? Are we putting the patient first? Integrated Practice Unit (IPU) “Value in healthcare according to Porter is co-produced by the physician and patient” ( Kaplan & Porter, 2011 ). 10

11. Delivering Value Standardized Clinical Assessment and Management Plan (SCAMP) Patient Condition Standardize Process through SCAMP Patient Compliance through IPU Best Possible Health Outcome Physician Incentives 11

12. Physician Bonus Payments Production based vs. Value-basedNew payment system incentives Quality Utilization (time) Length of stay Efficiency rates Utilization per TDABC measurementsBonus calculation Utilization & length of stay 12

13. References Glass, P., Pieper, K., Mark, B. (1999). Incentive Based Physician Compensation Models. Ambulatory Care Manage. 22(3). Retrieved from: http://www.aspenpublishers.com/books/KongstvedtOLD/Readings/Chapter%2007/JACM%2022-3.p36-46.pdf Hennrikus, W., Waters, P., Donald, B., Sohrad, V., Apurva, S. (2012). Inside the Value Revolution At Children's Hospital Boston: Time-Driven Activity-Based Costing In Orthopedic Surgery. The Harvard Orthopedic Journal. 14(1). Retrieved: http://orthojournalhms.org/research/journalArticles/watersValueRevolution.pdf Kaplan, R., Porter, M. (2011). How to Solve The Cost Crisis In Health Care. Harvard Business Review. Retrieved from:www.anesthetist.org/lobby/Economics_of_Healthcare_HBR.pdf. Porter, M. (2011). Value-Based Health Care Delivery IPUs, Outcomes, and Cost Measurement, and Bundled Pricing. Harvard Business School. Retrieved from: www.isc.hbs.edu. 13